Financial Statements and Auditor's Report For the year ended December 31, 2011
FINANCIAL STATEMENTS AND AUDITOR'S REPORT CONTENTS PAGE(S) AUDITOR'S REPORT 1 & 2 THE COMPANY AND CONSOLIDATED BALANCE SHEETS 3-5 THE COMPANY AND CONSOLIDATED INCOME STATEMENTS 6 & 7 THE COMPANY AND CONSOLIDATED CASH FLOW STATEMENTS 8 & 9 THE COMPANY AND CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 10 & 11 12-133
Note: This auditor's report was issued in Chinese. The following is an English translation prepared for your reference only. Should there be any conflict between the Chinese and English version, the Chinese version shall prevail. AUDITOR'S REPORT TO THE SHAREHOLDERS OF GEMDALE CORPORATION De Shi Bao (Shen) Zi (12) No.[P1073] We have audited the accompanying financial statements of Gemdale Corporation ("Gemdale Company"), which comprise the company and consolidated balance sheets as at December 31, 2011, and the company and consolidated income statements, the company and consolidated statements of changes in shareholders' equity and the company and consolidated cash flow statements for the year then ended, and the notes to the financial statements. 1. Management's responsibility for the financial statements Management of Gemdale Company is responsible for the preparation and fair presentation of these financial statements. This responsibility includes: (1) preparing the financial statements in accordance with Accounting Standards for Business Enterprises to achieve fair presentation of the financial statements; (2) designing, implementing and maintaining internal control which is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 2. Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing. Those standards require that we comply with the Code of Ethics for Chinese Public Accountants and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider the internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. - 1 -
AUDITOR'S REPORT TO THE SHAREHOLDERS OF GEMDALE CORPORATION - continued 3. Opinion In our opinion, the financial statements of Gemdale Company present fairly, in all material respects, Gemdale Company's and consolidated financial position as of December 31, 2011, and Gemdale Company's and consolidated results of operations and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises. Deloitte Touche Tohmatsu CPA Ltd. Shanghai, China Chinese Certified Public Accountant Gan Chang Ru Chinese Certified Public Accountant Chen Jin Hai April 23, 2012-2 -
AT DECEMBER 31, 2011 THE CONSOLIDATED BALANCE SHEET ITEMS NOTES Closing balance Opening balance ITEMS NOTES Closing balance Opening balance CURRENT ASSETS: CURRENT LIABILITIES: Currency funds (VI)1 18,638,387,570.90 13,631,399,765.56 Short-term borrowings (VI)16 2,279,446,546.81 200,000,000.00 Provision of settlement fund - - Borrowings from central bank - - Funds lent - - Deposits from customers and interbank - - Held-for-trading financial assets - - Deposit funds - - Notes receivable - - Held-for-trading financial liabilities - - Accounts receivable (VI)2 3,252,105.93 12,394,023.56 Notes payable - - Advances to suppliers (VI)3 795,979,252.15 8,882,056,601.41 Accounts payable (VI)17 5,785,707,445.44 2,953,289,556.30 Insurance premiums receivable - - Advances from customers (VI)18 23,213,776,291.64 18,869,965,079.82 Cession premiums receivable - - Provision of cession receivable - - Funds from sales of financial assets with repurchasement agreement Handling charges and commissions payable - - - - Interest receivable - - Employee benefits payable (VI)19 765,528,297.26 661,723,951.53 Dividends receivable - - Tax payable (VI)20 613,324,717.43 571,000,393.77 Other receivables (VI)4 2,043,933,734.52 1,437,019,531.64 Interest payable (VI)21 76,283,554.54 65,362,491.76 Recoursable financial assets acquired - - Dividends payable (VI)22 32,189,545.93 43,440,000.00 Inventories (VI)5 64,135,243,833.82 45,455,497,951.75 Other payables (VI)23 4,331,203,133.39 4,334,434,323.32 Non-current assets due within one year - - Cession premiums payable - - Other current assets (VI)6 2,621,369,433.38 1,454,799,048.42 Provision for insurance contracts - - Total current assets 88,238,165,930.70 70,873,166,922.34 NON-CURRENT ASSETS: Loans and payments on behalf - - Receivings from vicariously traded securities Receivings from vicariously sold securities Non-current liabilities due within one year - - - - (VI)24 11,879,826,903.61 4,847,000,000.00 Available-for-sale financial assets - - Other current liabilities (VI)25 3,052,296.54 3,052,296.54 Held-to-maturity investments - - Total current liabilities 48,980,338,732.59 32,549,268,093.04 Long-term receivables - - NON-CURRENT LIABILITIES: Long-term equity investments (VI)7 8 157,752,577.56 143,873,900.72 Long-term borrowings (VI)26 14,171,764,608.04 18,063,609,367.76 Investment properties (VI)9 1,283,150,487.11 1,344,969,330.10 Bonds payable (VI)27 1,192,104,303.30 1,190,146,914.48 Fixed assets (VI)10 124,276,171.32 80,920,520.11 Long-term payables - - Construction in progress (VI)11 67,770,102.52 2,553,233.20 Special payables - - Construction materials - - Provisions - - Fixed assets held for disposal - - Deferred tax liabilities (VI)14 14,067,887.39 7,912,600.67 Bearer biological assets - - Other non-current liabilities - - Oil and natural gas assets - - Total non-current liabilities 15,377,936,798.73 19,261,668,882.91 Intangible assets - - TOTAL LIABILITIES 64,358,275,531.32 51,810,936,975.95-3 -
AT DECEMBER 31, 2011 - continued THE CONSOLIDATED BALANCE SHEET ITEMS NOTES Closing balance Opening balance ITEMS NOTES Closing balance Opening balance Development expenditure - - SHAREHOLDERS' EQUITY Goodwill (VI)12 7,643,930.97 7,643,930.97 Share capital (VI)28 4,471,508,572.00 4,471,508,572.00 Long-term prepayments (VI)13 10,221,848.11 11,353,205.23 Capital reserve (VI)29 6,216,486,637.00 6,145,335,356.05 Deferred tax assets (VI)14 611,073,175.11 352,056,440.54 Less: Treasury shares - - Other non-current assets - - Special reserve - - Total non-current assets 2,261,888,292.70 1,943,370,560.87 Surplus reserve (VI)30 830,463,956.74 711,139,360.25 Unappropriated profit (VI)31 8,786,909,058.66 6,157,297,367.98 Translation differences arising on translation of financial statements denominated in foreign currencies 341,533,144.04 194,904,637.00 Total shareholders' equity 20,646,901,368.44 17,680,185,293.28 attributable to equity holders of the parent Minority interests 5,494,877,323.64 3,325,415,213.98 TOTAL SHAREHOLDERS' EQUITY TOTAL ASSETS 90,500,054,223.40 72,816,537,483.21 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 26,141,778,692.08 21,005,600,507.26 90,500,054,223.40 72,816,537,483.21 The accompanying notes form part of the financial statements. The financial statements on pages 3 to 133 were signed by the followings: Legal Representative Chief Accountant Person in Charge of the Accounting Body - 4 -
AT DECEMBER 31, 2011 THE COMPANY BALANCE SHEET ITEMS NOTES Closing balance Opening balance ITEMS NOTES Closing balance Opening balance Current Assets: Current Liabilities: Currency funds 7,234,144,561.72 7,813,755,697.36 Short-term borrowings 1,630,000,000.00 200,000,000.00 Loans to others - - Held-for-trading financial - - liabilities Held-for-trading financial assets - - Notes payable - - Notes receivable - - Accounts payable 5,679,178.53 8,987,480.17 Accounts receivable 134,934.10 134,934.10 Advances from customers 1,339,612.86 740,635.30 Advances to suppliers 65,868,278.59 9,430,871.95 Employee benefits payable 504,218,284.94 469,171,047.76 Interest receivable - - Tax payable 30,898,908.63 19,510,027.38 Dividends receivable 58,978,176.48 118,920,486.79 Interest payable 53,758,822.22 52,616,700.00 Other receivables (XIII)1 33,678,208,293.88 28,352,610,882.29 Dividends payable - - Inventories 3,510,353.92 5,179,479.47 Other payables 9,561,736,270.42 7,314,414,933.01 Non-current assets due within one year - - Non-current liabilities due within one year 10,681,395,753.97 4,030,000,000.00 Other current assets 1,000,102,523.78 43,853.10 Other current liabilities 49,311.07 49,311.07 Total current assets 42,040,947,122.47 36,300,076,205.06 Total current liabilities 22,469,076,142.64 12,095,490,134.69 Non-current Assets: Non-current Liabilities: Available-for-sale financial assets Held-to-maturity investments - - Long-term borrowings 10,096,342,591.27 14,239,000,000.00 - - Bonds payable 1,192,104,303.30 1,190,146,914.48 Long-term receivables - - Long-term payables - - Long-term equity investments (XIII)2 7,331,614,630.11 5,865,856,180.38 Special payables - - Investment property 16,481,157.25 61,162,142.98 Provisions - - Fixed assets 36,822,439.33 33,259,826.96 Deferred tax liabilities - - Construction in progress 63,770,462.97 - Other non-current liabilities - - Construction materials - - Total non-current liabilities 11,288,446,894.57 15,429,146,914.48 Fixed assets held for disposal - - TOTAL LIABILITIES 33,757,523,037.21 27,524,637,049.17 Bearer biological assets - - SHAREHOLDERS' EQUITY Oil and natural gas assets - - Share capital 4,471,508,572.00 4,471,508,572.00 Intangible assets - - Capital reserve 6,236,388,893.59 6,145,335,356.05 Development expenditure - - Less: Treasury shares - - Goodwill - - Special reserve - - Long-term prepayments - 1,652,373.73 Surplus reserve 830,463,956.74 711,139,360.25 Deferred tax assets 129,614,356.56 108,348,463.47 General risk provision - - Other non-current assets - - Unappropriated profit 4,323,365,709.15 3,517,734,855.11 Total non-current assets 7,578,303,046.22 6,070,278,987.52 TOTAL SHAREHOLDERS' EQUITY TOTAL ASSETS 49,619,250,168.69 42,370,355,192.58 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 15,861,727,131.48 14,845,718,143.41 49,619,250,168.69 42,370,355,192.58-5 -
THE CONSOLIDATED INCOME STATEMENT ITEMS NOTES 2011 2010 I. Total operating income (VI)32 23,918,506,165.62 19,592,529,782.08 Including: Operating income 23,918,506,165.62 19,592,529,782.08 Interest income - - Earned premium - - Handling charges and commissions income - - II. Total operating costs 18,951,599,406.23 15,471,303,121.18 Including: Operating costs (VI)32 14,655,653,813.03 12,133,691,974.72 Interest expense - - Handling charges and commissions expenses - - Refund of insurance premiums - - Net payments for insurance claims - - Net provision for insurance contracts - - Commissions on insurance policies - - Cession charges - - Taxes and surcharges on operations (VI)33 2,418,344,276.99 2,015,941,914.26 Selling and distribution expenses (VI)34 949,722,687.05 514,350,947.94 Administrative expenses (VI)35 902,102,335.52 824,491,582.43 Financial expenses (VI)36 21,259,145.57 32,141,193.54 Impairment loss in respect of assets (VI)37 4,517,148.07 (49,314,491.71) Add: Gains from changes in fair values - - Investment income (VI)38 11,602,500.14 84,676,547.73 Including: Income from investment in associates and joint ventures 8,285,089.18 84,542,278.62 III. Operating profit 4,978,509,259.53 4,205,903,208.63 Add: Non-operating income (VI)39 30,344,403.75 24,923,579.49 Less: Non-operating expenses (VI)40 14,525,338.54 4,585,530.70 Including: Losses from disposal of non-current assets 284,765.03 281,415.95 IV. Total profit 4,994,328,324.74 4,226,241,257.42 Less: Income tax expenses (VI)41 1,253,453,731.07 1,093,405,753.09 V. Net profit 3,740,874,593.67 3,132,835,504.33 Net profit attributable to shareholders of the parent 3,017,226,801.49 2,694,043,630.78 Profit or loss attributable to minority interests 723,647,792.18 438,791,873.55 VI. Earnings per share: (I) Basic earnings per share (VI)42 0.67 0.60 (II) Diluted earnings per share N/A N/A VII. Other comprehensive income (VI)43 181,402,775.87 99,762,369.06 VIII.Total comprehensive income 3,922,277,369.54 3,232,597,873.39 Total comprehensive income attributable to shareholders of the parent 3,163,855,308.53 2,782,210,723.53 Total comprehensive income attributable to minority interests 758,422,061.01 450,387,149.86-6 -
THE COMPANY INCOME STATEMENT ITEMS NOTES 2011 2010 I. Operating income (XIII)3 377,013,551.93 542,714,017.76 Less: Operating costs (XIII)3 310,256,063.59 145,916,391.56 Business taxes and levies 25,477,980.77 133,181,728.06 Selling and distribution expenses 32,584.32 3,007,770.41 Administrative expenses 324,808,854.78 393,000,409.52 Financial expenses (321,494,652.13) (173,584,288.46) Impairment loss in respect of assets (89,421.92) 202,175.55 Add: Gains from changes in fair values - - Investment income (XIII)4 1,163,480,013.39 2,085,385,528.28 Including: Income from investment in associates and joint ventures 9,758,668.86 19,620,896.16 II. Operating profit 1,201,502,155.91 2,126,375,359.40 Add: Non-operating income 418,238.80 244,771.09 Less: Non-operating expenses 432,266.68 81,441.79 Including: Losses from disposal of non-current assets 124,666.68 2,261.79 III. Total profit 1,201,488,128.03 2,126,538,688.70 Less: Income tax expenses 8,242,163.18 16,751,868.75 IV. Net profit 1,193,245,964.85 2,109,786,819.95 V. Earnings per share: (I) Basic earnings per share N/A N/A (II) Diluted earnings per share N/A N/A VI. Other comprehensive income - - VII. Total comprehensive income 1,193,245,964.85 2,109,786,819.95-7 -
CONSOLIDATED CASH FLOW STATEMENTS ITEMS NOTES 2011 2010 I. Cash Flows from Operating Activities: Cash receipts from the sale of goods and the rendering of services 28,271,940,448.66 26,058,764,762.38 Net increase in deposits from customers and placements from corporations in the - - same industry Net increase in loan from central bank - - Net increase in funds borrowed from other financial institutions - - Cash premiums received on original insurance contracts - - Cash received from re-insurance business - - Net increase in deposits and investments from insurers - - Net increase in disposal of trading financial assets - - Interest, handling charges and commissions received - - Net increase in funds deposit - - Net increase in repurchasement business funds - - Receipts of tax refunds - - Other cash receipts relating to operating activities (VI)44(1) 233,260,472.27 261,822,284.36 Sub-total of cash inflows 28,505,200,920.93 26,320,587,046.74 Cash payments for goods purchased and services received 19,420,583,799.02 23,170,658,648.72 Net increase in loans and payments on behalf - - Net increase in deposits with centre bank and interbank - - Payments of claims for original insurance contracts - - Interests, handling charges and commissions paid - - Commissions on insurance policies paid - - Cash payments to and on behalf of employees 769,839,907.72 530,710,745.57 Payments of all types of taxes 4,522,540,846.39 3,324,539,700.53 Other cash payments relating to operating activities (VI)44(2) 2,261,975,144.56 2,333,443,598.87 Sub-total of cash outflows 26,974,939,697.69 29,359,352,693.69 Net Cash Flows from Operating Activities 1,530,261,223.24 (3,038,765,646.95) II. Cash Flows from Investing Activities: Cash receipts from disposals and returns of investments 1,622,235,512.95 200,134,269.11 Cash receipts from returns on investments 3,317,410.96 85,418,844.99 Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets 487,573.97 374,120.15 Net cash receipts from disposals of subsidiaries and other business units - - Other cash receipts relating to investing activities - - Sub-total of cash inflows 1,626,040,497.88 285,927,234.25 Cash payments to acquire and construct fixed 89,360,069.34 39,614,105.33 assets, intangible assets and other long-term assets Cash payments to acquire investments 2,652,462,819.05 228,713,192.66 Net increase in secured loans - - Net cash payments for acquisitions of subsidiaries and other business units - - Other cash payments relating to investing activities 41,722.41 - Sub-total of cash outflows 2,741,864,610.80 268,327,297.99 Net Cash Flows from Investing Activities (1,115,824,112.92) 17,599,936.26 III. Cash Flows from Financing Activities: Cash receipts from investors making investment in the enterprise 1,548,507,513.57 1,161,215,354.14 Including: cash receipts from minorities making investment in subsidiaries 1,507,910,200.80 1,161,215,354.14 Cash receipts from borrowings 11,431,169,562.13 10,943,625,893.51 Cash receipts from issue of bonds - - Other cash receipts relating to financing activities - - Sub-total of cash inflows 12,979,677,075.70 12,104,841,247.65 Cash repayments of amounts borrowed 6,102,472,400.00 3,961,076,817.60 Cash payments for distribution of dividends or profit or interest expenses 2,246,714,385.65 1,475,300,695.74 Including: payments for distribution of dividends or profit to minorities of subsidiaries 354,614,656.63 132,365,543.39 Other cash payments relating to financing activities (VI)44(3) 1,770,595,675.73 32,780,444.82 Sub-total of cash outflows 10,119,782,461.38 5,469,157,958.16 Net Cash Flows from Financing Activities 2,859,894,614.32 6,635,683,289.49 IV. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents 75,909,657.02 18,685,204.29 V. Net Increase in Cash and Cash Equivalents 3,350,241,381.66 3,633,202,783.09 Add: Opening Balance of Cash and Cash Equivalents (VI)45(3) 12,882,720,330.88 9,249,517,547.79 VI. Closing Balance of Cash and Cash Equivalents (VI)45(3) 16,232,961,712.54 12,882,720,330.88-8 -
THE COMPANY CASH FLOW STATEMENTS ITEMS NOTE 2011 2010 I. Cash Flows from Operating Activities: S Cash receipts from the sale of goods and the rendering of services 377,619,631.29 112,034,546.51 Receipts of tax refunds - - Other cash receipts relating to operating activities 119,290,507.79 354,780,622.91 Sub-total of cash inflows 496,910,139.08 466,815,169.42 Cash payments for goods purchased and services received 302,442,990.41 21,539,185.68 Cash payments to and on behalf of employees 109,762,526.94 90,272,809.52 Payments of all types of taxes 147,752,679.02 178,607,152.49 Other cash payments relating to operating activities 1,501,634,555.55 3,994,616,556.03 Sub-total of cash outflows 2,061,592,751.92 4,285,035,703.72 Net Cash Flows from Operating Activities (1,564,682,612.84) (3,818,220,534.30) II. Cash Flows from Investing Activities: Cash receipts from disposals and returns of investments 2,092,691,079.99 800,134,269.11 Cash receipts from returns on investments 1,229,089,026.68 2,083,088,187.00 Net cash receipts from disposals of fixed assets, 63,238.80 126,890.99 intangible assets and other long-term assets Net cash receipts from disposals of subsidiaries and other business units 143,369.04 25,974,593.36 Other cash receipts relating to investing activities - - Sub-total of cash inflows 3,321,986,714.51 2,909,323,940.46 Cash payments to acquire and construct fixed 32,028,954.59 6,539,044.02 assets, intangible assets and other long-term assets Cash payments to acquire investments 4,487,829,162.00 2,274,202,995.53 Net cash payments for acquisitions of - - subsidiaries and other business units Other cash payments relating to investing activities - - Sub-total of cash outflows 4,519,858,116.59 2,280,742,039.55 Net Cash Flows from Investing Activities (1,197,871,402.08) 628,581,900.91 III. Cash Flows from Financing Activities: Cash receipts from investors making investment in the enterprise - - Cash receipts from borrowings 9,184,998,904.00 9,259,000,000.00 Cash receipts from issue of bonds - - Other cash receipts relating to financing activities - - Sub-total of cash inflows 9,184,998,904.00 9,259,000,000.00 Cash repayments of amounts borrowed 5,246,260,558.76 3,943,275,000.00 Cash payments for distribution of dividends 1,687,039,065.25 1,168,061,642.97 Other cash fi payments i relating to financing activities 1,735,518,825.23 32,780,444.82 Sub-total of cash outflows 8,668,818,449.24 5,144,117,087.79 Net Cash Flows from Financing Activities 516,180,454.76 4,114,882,912.21 IV. Effect of Foreign Exchange Rate Changes 165,247.18 81,784.34 V. Net CIncrease h dc in Cash he and i Cash l Equivalents (2,246,208,312.98) 925,326,063.16 Add: Opening Balance of Cash and Cash Equivalents 7,130,191,572.68 6,204,865,509.52 VI. Closing Balance of Cash and Cash Equivalents 4,883,983,259.70 7,130,191,572.68-9 -
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 2011 2010 Attributable to equity holders of the parent Attributable to equity holders of the parent Unappropriated Total shareholders' Unappropriated Total shareholders' ITEMS Share capital Capital reserve Surplus reserve profit Others Minority interests equity Share capital Capital reserve Surplus reserve profit Others Minority interests equity I. Balance at December 31, 2010 4,471,508,572.00 6,145,335,356.05 711,139,360.25 6,157,297,367.98 194,904,637.00 3,325,415,213.98 21,005,600,507.26 2,484,171,429.00 7,995,226,061.23 500,160,678.25 3,922,649,562.10 106,737,544.25 1,841,614,823.23 16,850,560,098.06 Add: Changes in accounting policies - - - - - - - - - - - - - - Correction of prior periods errors - - - - - - - - - - - - - - Others - - - - - - - - - - - - - - II. Balance at January 1, 2011 4,471,508,572.00 6,145,335,356.05 711,139,360.25 6,157,297,367.98 194,904,637.00 3,325,415,213.98 21,005,600,507.26 2,484,171,429.00 7,995,226,061.23 500,160,678.25 3,922,649,562.10 106,737,544.25 1,841,614,823.23 16,850,560,098.06 III. Changes for the year - 71,151,280.95 119,324,596.49 2,629,611,690.68 146,628,507.04 2,169,462,109.66 5,136,178,184.82 1,987,337,143.00-1,849,890,705.18 210,978,682.00 2,234,647,805.88 88,167,092.75 1,483,800,390.75 4,155,040,409.20 (I) Net profit - - - 3,017,226,801.49-723,647,792.18 3,740,874,593.67 - - - 2,694,043,630.78-438,791,873.55 3,132,835,504.33 (II) Other comprehensive income - - - - 146,628,507.04 34,774,268.83 181,402,775.87 - - - - 88,167,092.75 11,595,276.31 99,762,369.06 Subtotal of (I) and (II) - - - 3,017,226,801.49 146,628,507.04 758,422,061.01 3,922,277,369.54 - - - 2,694,043,630.78 88,167,092.75 450,387,149.86 3,232,597,873.39 (III) Owner's contributions and reduction in capital 1. Capital contribution from shareholders 2. Share-based payment recognised in shareholders' equity - 71,151,280.95 - - - 1,773,154,705.28 1,844,305,986.23-137,446,437.82 - - - 1,165,778,784.28 1,303,225,222.10 - - - - - 1,770,101,335.55 1,770,101,335.55 - - - - - 1,159,215,354.14 1,159,215,354.14-91,053,537.54 - - - 3,053,369.73 94,106,907.27-137,446,437.82 - - - 6,563,430.14 144,009,867.96 3. Others - (19,902,256.59) - - - - (19,902,256.59) - - - - - - - (IV) Profit distribution - - 119,324,596.49 (387,615,110.81) - (362,114,656.63) (630,405,170.95) - - 210,978,682.00 (459,395,824.90) - (132,365,543.39) (380,782,686.29) 1. Transfer to surplus reserve 2.Transfer to generic risk reserve 3. Distribution to shareholders - - 119,324,596.49 (119,324,596.49) - - - - - 210,978,682.00 (210,978,682.00) - - - - - - - - - - - - - - - - - - - - (268,290,514.32) (362,114,656.63) (630,405,170.95) - - - (248,417,142.90) - (132,365,543.39) (380,782,686.29) 4.Others - - - - - - - - - - - - - - (V)Transfer within shareholders' equity 1.Capitalization of capital reserve 2.Capitalization of surplus reserve 3.Loss made up by surplus reserve - - - - - - - 1,987,337,143.00 (1,987,337,143.00) - - - - - - - - - - - - 1,987,337,143.00 (1,987,337,143.00) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4.Others - - - - - - - - - - - - - - IV. Balance at December 31, 2011 4,471,508,572.00 6,216,486,637.00 830,463,956.74 8,786,909,058.66 341,533,144.04 5,494,877,323.64 26,141,778,692.08 4,471,508,572.00 6,145,335,356.05 711,139,360.25 6,157,297,367.98 194,904,637.00 3,325,415,213.98 21,005,600,507.26-10 -
THE COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 2011 2010 ITEMS Share capital Capital reserve Surplus reserve Unappropriated profit Total shareholders' equity Share capital Capital reserve Surplus reserve Unappropriated profit Total shareholders' equity I. Balance at December 31, 2010 4,471,508,572.00 6,145,335,356.05 711,139,360.25 3,517,734,855.11 14,845,718,143.41 2,484,171,429.00 7,995,226,061.23 500,160,678.25 1,867,343,860.06 12,846,902,028.54 Add: Changes in accounting policies - - - - - - - - - - Correction of prior periods errors - - - - - - - - - - Others - - - - - - - - - - II. Balance at January 1, 2011 4,471,508,572.00 6,145,335,356.05 711,139,360.25 3,517,734,855.11 14,845,718,143.41 2,484,171,429.00 7,995,226,061.23 500,160,678.25 1,867,343,860.06 12,846,902,028.54 III. Changes for the year - 91,053,537.54 119,324,596.49 805,630,854.04 1,016,008,988.07 1,987,337,143.00 (1,849,890,705.18) 210,978,682.00 1,650,390,995.05 1,998,816,114.87 (I) Net profit - - - 1,193,245,964.85 1,193,245,964.85 - - - 2,109,786,819.95 2,109,786,819.95 (II) Other comprehensive income - - - - - - - - - - Subtotal of (I) and (II) - - - 1,193,245,964.85 1,193,245,964.85 - - - 2,109,786,819.95 2,109,786,819.95 (III) Owner's contributions and reduction in capital 1. Capital contribution from shareholders 2. Share-based payment recognised in shareholders' equity - 91,053,537.54 - - 91,053,537.54-137,446,437.82 - - 137,446,437.82 - - - - - - - - - - - 91,053,537.54 - - 91,053,537.54-137,446,437.82 - - 137,446,437.82 3. Others - - - - - - - - - - (IV) Profit distribution - - 119,324,596.49 (387,615,110.81) (268,290,514.32) - - 210,978,682.00 (459,395,824.90) (248,417,142.90) 1. Transfer to surplus reserve - - 119,324,596.49 (119,324,596.49) - - - 210,978,682.00 (210,978,682.00) - 2.Transfer to generic risk reserve - - - - - - - - - - 3. Distribution to shareholders - - - (268,290,514.32) (268,290,514.32) - - - (248,417,142.90) (248,417,142.90) 4.Others - - - - - - - - - - (V)Transfer within shareholders' equity - - - - - 1,987,337,143.00 (1,987,337,143.00) - - - 1.Capitalisation of capital reserve - - - - - 1,987,337,143.00 (1,987,337,143.00) - - - 2.Capitalisation of surplus reserve - - - - - - - - - - 3.Loss made up by surplus reserve - - - - - - - - - - 4.Others - - - - - - - - - - IV. Balance at December 31, 2011 4,471,508,572.00 6,236,388,893.59 830,463,956.74 4,323,365,709.15 15,861,727,131.48 4,471,508,572.00 6,145,335,356.05 711,139,360.25 3,517,734,855.11 14,845,718,143.41-11 -
(I) BASIC INFORMATION ABOUT THE COMPANY Gemdale Corporation (the "Company") is a joint stock limited company established by Shenzhen Futian District State-owned Assets Supervision and Administration Bureau, Shenzhen Investment Administration Company, UTStarcom (US) Co., Ltd., Shenzhen Fang Xingda Construction Engineering Co., Ltd. and the Labour Union of Gemdale Industries (subsequently renamed as "the Labour Union of Gemdale Corporation") as promoters in accordance with the approval issued by Leading Office of Shenzhen Enterprise System Reform (filed as Shen Qi Gai Ban [1996] No. 02). The Company was established on February 8, 1996 and its registered capital was RMB110 million. The Company issued additional 70,000,000 shares at the price of RMB1.66 per share in 1998 pursuant to The Approval of the Application for Capital Increase by Gemdale Corporation issued by the Leading Office of Shenzhen Enterprise System Reform (filed as Shen Qi Gai Ban [1998] No. 3) and Reply on the Application for Capital Increase by Gemdale Corporation issued by Shenzhen Municipal Securities Regulatory Office (filed as Shen Zhen Ban Han [1998] No. 48). All the 54,000,000 state-owned shares held by Shenzhen Futian District State-owned Assets Supervision and Administration Bureau were transferred to Shenzhen Futian Investment Development Company on November 5, 1998 pursuant to the approval released by Futian District State-owned Assets Supervision and Administration Commission (filed as Fu Guo Zi Wei [1998] No. 8). In July 2000, all the shares in the Company held by the Labour Union of Gemdale Corporation were transferred to Shenzhen Zhong Kexun Industrial Co., Ltd., Shenzhen Futian Investment Development Company and Shenzhen Shen Ye Investment Development Co., Ltd. pursuant to the approval issued by the Economic Restructuring Office of Shenzhen Municipal Government (filed as Shen Gai Zi [2000] No. 63). The Company issued 90,000,000 ordinary shares (A-share) to the public at a price of RMB9.42 per share on January 15, 2001 as endorsed by the China Securities Regulatory Commission (filed as Zhen Jian Fa Xing Zi [2001] No. 2). The shares of the Company were traded on the Shanghai Stock Exchange commencing on April 12, 2001. The Company further issued 100,000,000 RMB ordinary shares (A-share) to the public at a price of RMB8.98 per share on December 20, 2004 as approved by the China Securities Regulatory Commission (filed as Zhen Jian Fa Xing Zi [2004] No.163). Such shares were traded on the Shanghai Stock Exchange on January 6, 2005. On April 29, 2005, per the resolution passed in 2004 annual shareholders general meeting, the Company issued scrip dividends to shareholders on 8 new shares for every ten shares outstanding on December 31, 2004 (i.e. 296,000,000 new shares in total). After the scrip dividends were issued, the registered capital of the Company was increased to RMB666, 000,000. On August 24, 2006, the Company completed the share split reform under which circulating shareholders obtained the consideration of 2.5 new shares for every ten circulating shares from non-circulating shareholders. The Company issued 173,076,923 ordinary shares (A-share) non-publicly to ten specified objects at a price of RMB26 per share on June 25, 2007 as approved by the China Securities Regulatory Commission (filed as Zhen Jian Fa Xing Zi [2007] No.151). On July 24, 2007, the Company completed its registration for industrial and commercial change and the registered capital of the Company was accordingly increased to RMB839,076,923. - 12 -
(I) BASIC INFORMATION ABOUT THE COMPANY - continued On March 18, 2008, per the resolution passed in 2007 annual shareholders general meeting, the Company issued scrip dividends to shareholders on ten new shares for every ten shares outstanding on December 31, 2007 (i.e. 839,076,923 new shares in total). After the scrip dividends were issued, the registered capital of the Company was increased to RMB1,678,153,846. On May 8, 2009, per the resolution passed in 2008 annual shareholders general meeting, the Company issued scrip dividends to shareholders on three new shares for every ten shares outstanding on December 31, 2009 (i.e. 503,446,154 new shares in total). After the scrip dividends were issued, the registered capital of the Company was increased to RMB2,181,600,000. The Company issued 302,571,429 ordinary shares (A-share) non-publicly to nine specified objects at a price of RMB14 per share on July 21, 2009 as approved by the China Securities Regulatory Commission (filed as Zhen Jian Fa Xing Zi [2010] No. 657). On December 17, 2009, the Company completed its registration for industrial and commercial change and the registered capital of the Company was accordingly increased to RMB2,484,171,429. On March 30, 2010, per the resolution passed in 2009 annual shareholders general meeting, the Company issued scrip dividends to shareholders on eight new shares for every ten shares outstanding on December 31, 2009 (i.e. 1,987,337,143 new shares in total). After the scrip dividends were issued, the registered capital of the Company was increased to RMB4,471,508,572. The Company's head office is located in Shenzhen. The Company and its subsidiaries are mainly engaged in real estate development and operation, management of self-owned properties, set-up of various entities. (II) THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, AND PRIOR PERIOD ERRORS 1. Basis of preparation of financial statements The Company has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance (MoF) on February 15, 2006. In addition, the Company has disclosed relevant financial information in accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No. 15- General Provisions on Financial Reporting (Revised in 2010). Basis of accounting and principle of measurement The Company has adopted the accrual basis of accounting. Except for certain financial instruments which are measured at fair value, the Company adopts the historical cost as the principle of measurement of the financial statements. Where assets are impaired, provisions for asset impairment are made in accordance with relevant requirements. - 13 -
(II) THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, AND PRIOR PERIOD ERRORS - continued 2. Statement of compliance with the ASBE The financial statements of the Company have been prepared in accordance with Accounting Standards for Business Enterprises, and present truly and completely, the Company's and consolidated financial position as of December 31, 2011, and the Company's and consolidated results of operations and cash flows for the year then ended. 3. Accounting period The Company has adopted the calendar year as its accounting year, i.e. from January 1 to December 31. 4. Functional currency Renminbi ( RMB ) is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose RMB as their functional currency. The Company's foreign subsidiary chooses currency Hong Kong dollar ( HKD ) as its functional currency on the basis of the primary economic environment in which it operates. The Company adopts RMB to prepare its financial statements. 5. The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control Business combinations are classified into business combinations involving enterprises under common control and business combinations not involving enterprises under common control. 5.1 Business combinations involving enterprises under common control A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. Assets and liabilities obtained shall be measured at their respective carrying amounts as recorded by the combining entities at the date of the combination. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination is adjusted to the share premium in capital reserve. If the share premium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. Costs that are directly attributable to the combination are charged to profit or loss in the period in which they are incurred. - 14 -
(II) THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, AND PRIOR PERIOD ERRORS - continued 5. The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control - continued 5.2 Business combinations not involving enterprises under common control and goodwill A business combination not involving enterprises under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination. The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer, in exchange for control of the acquire, the intermediary expenses (fees in respect of auditing, legal services, valuation and consultancy services, etc.) and other administrative expenses attributable to the business combination are recognised in profit or loss in the periods when they are incurred. Where a business combination not involving enterprises under common control is achieved in stages that involve multiple transactions, the cost of combination is the sum of the consideration paid at the acquisition date and the fair value of the equity in the acquiree held before the acquisition. The equity held in the acquiree before the acquisition date is remeasured at its fair value at the acquisition date, with any difference between its fair value and its carrying amount being recognised as investment income, and the other comprehensive income relating to the equity held in the acquiree before the acquisition date being transferred to investment income. The acquirer's identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business combination that meet the recognition criteria, shall be measured at fair value at the acquisition date. Where the cost of combination exceeds the acquirer's interest in the fair value of the acquirer's identifiable net assets, the difference is treated as an asset and recognised as goodwill, which is measured at cost on initial recognition. Where the cost of combination is less than the acquirer's interest in the fair value of the acquirer's identifiable net assets, the acquirer reassesses the measurement of the fair values of the acquirer's identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after that reassessment, the cost of combination is still less than the acquirer's interest in the fair value of the acquirer's identifiable net assets, the acquirer recognises the remaining difference immediately in profit or loss for the current period. Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and is presented separately in the consolidated financial statements. It is tested for impairment at least at the end of each year. For the purpose of impairment testing, goodwill is considered together with the related assets group(s), i.e., goodwill is reasonably allocated to the related assets group(s) or each of assets group(s) expected to benefit from the synergies of the combination. In testing an assets group with goodwill for impairment, an impairment loss is recognised if the recoverable amount of the assets group or sets of assets groups (including goodwill) is less than its carrying amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill allocated to such assets group or sets of assets groups, and then to the other assets of the Company pro-rata basis on the basis of the carrying amount of each asset (other than goodwill) in the group. - 15 -
(II) 'S SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, AND PRIOR PERIOD ERRORS - continued 5. The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control - continued 5.2 Business combinations not involving enterprises under common control and goodwill - continued The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. An asset's fair value is the price in a sale agreement in an arm's length transaction. If there is no sale agreement but an asset is traded in an active market, fair value is the current bid price. If there is no sale agreement or active market for an asset, fair value is assessed based on the best information available. Costs of disposal include legal costs related to the disposal of the asset, related taxes, costs of removing the asset and direct costs to bring the asset into condition for its sale. The present value of expected future cash flows of an asset shall be determined by estimating the future cash flows to be derived from continuing use of the asset and from its ultimate disposal and applying the appropriate discount rate to those future cash flows. The impairment of goodwill is recognised in profit or loss for the period in which it is incurred and will not be reversed in any subsequent period. 6. Preparation of consolidated financial statements The scope of consolidation in the consolidated financial statements is determined on the basis of control. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities. For a subsidiary already disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate. For subsidiaries acquired through a business combination involving enterprises not under common control, the operating results and cash flows from the acquisition date (the date when control is obtained) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate, and no adjustment is made to the opening balances and comparative figures in the consolidated financial statements. No matter when the business combination occurs in the reporting period, subsidiaries acquired through a business combination involving enterprises under common control are included in the Group's scope of consolidation as if they had been included in the scope of consolidation from the date when they first came under the common control of the ultimate controlling party. Their operating results and cash flows from the beginning of the earliest reporting period are included in the consolidated income statement and consolidated statement of cash flows, as appropriate. The significant accounting policies and accounting periods adopted by the subsidiaries are determined based on the uniform accounting policies and accounting periods set out by the Company. - 16 -
(II) THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, AND PRIOR PERIOD ERRORS - continued 6. Preparation of consolidated financial statements continued All significant intra-group balances and transactions are eliminated on consolidation. The portion of subsidiaries' equity that is not attributable to the parent is treated as minority interests and presented as "minority interests" in the consolidated balance sheet within shareholders' equity. The portion of net profits or losses of subsidiaries for the period attributable to minority interests is presented as "minority interests" in the consolidated income statement below the "net profit" line item. When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds the minority shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount is still allocated against minority interests. Acquisition of minority interests or disposals of interests in a subsidiary that do not result in the loss of control over the subsidiary are accounted for as equity transactions. The carrying amounts of the parent's interests and minority interests are adjusted to reflect the changes in their relative interests in the subsidiary. The difference between the amount by which the minority interests are adjusted and the fair value of the consideration paid or received is adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, the excess are adjusted against retained earnings. When the Company loses control over a subsidiary due to disposal of equity investment or other reason, any retained interest is re-measured at its fair value at the date when control is lost. The difference between (i) the aggregate of the consideration received on disposal and the fair value of any retained interest and (ii) the share of the former subsidiary's net assets cumulatively calculated from the acquisition date according to the original proportion of ownership interests is recognised as investment income in the period in which control is lost. Other comprehensive income associated with investment in the former subsidiary is reclassified to investment income in the period in which control is lost. 7. Recognition criteria of cash and cash equivalents Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group's short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. - 17 -
(II) THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, AND PRIOR PERIOD ERRORS - continued 8. Translation of transactions and financial statements denominated in foreign currencies 8.1 Transactions denominated in foreign currencies A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange rate on the date of the transaction. At the balance sheet date, foreign currency monetary items are translated into RMB using the spot exchange rates at the balance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balance sheet date are recognised in profit or loss for the period, except that (1) exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalisation are capitalised as part of the cost of the qualifying asset during the capitalisation period; (2) exchange differences related to hedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting; (3) exchange differences arising from change in the carrying amounts (other than the amortised cost) of available-for-sale monetary items are recognised as other comprehensive income and included in capital reserve. When the consolidated financial statements include foreign operation(s), if there are foreign currency monetary items constituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates are recognised as "exchange difference arising on translation of financial statements denominated in foreign currency " in owner's equity, and in profit and loss for the period upon disposal of the foreign operation. Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spot exchange rates on the dates of the transactions; the amounts in functional currency remain unchanged. Foreign currency non-monetary items measured at fair value are re-translated at the spot exchange rate on the date the fair value is determined. Difference between the re-translated functional currency amount and the original functional currency amount is treated as changes in fair value (including changes of exchange rate) and is recognised in profit and loss or as other comprehensive income included in capital reserve. 8.2 Translation of financial statements denominated in foreign currencies For the purpose of preparing the consolidated financial statements, financial statements of a foreign operation are translated from the foreign currency into RMB using the following method: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items except for retained earnings are translated at the spot exchange rates at the dates on which such items arose; all items in the income statement as well as items reflecting the amount of profit distributed are translated at the spot exchange rates on the dates of the transactions; the opening balance of retained earnings is the translated closing balance of the previous year's retained earnings; the closing balance of retained earnings is calculated and presented on the basis of each translated income statement and profit distribution item. The difference between the translated assets and the aggregate of liabilities and shareholders' equity items is separately presented, as the translation difference of financial statements denominated in foreign currencies, under the owner's equity in the balance sheet. - 18 -
(II) THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, AND PRIOR PERIOD ERRORS - continued 8. Translation of transactions and financial statements denominated in foreign currenciescontinued 8.2 Translation of financial statements denominated in foreign currencies - continued Cash flows arising from transaction in a foreign currency and the cash flows of a foreign subsidiary are translated at average rate for the accounting period of the consolidated financial statements. The effect of exchange rate changes on cash and cash equivalents is regarded as a reconciling item and presented separately in the cash flow statement as "effect of exchange rate changes on cash and cash equivalents ". The opening balances and the comparative figures of previous year are presented at the translated amounts of previous year's financial statements. On disposal of the Group's entire interest in a foreign operation, or disposal of certain interest (or due to other reasons) resulting in a loss of control over a foreign operation, the Company transfers the accumulated translation differences attributable to the shareholders' equity of the parent that relating to translation of the financial statements of that foreign operation, presented under shareholders' equity, to profit or loss in the period in which the disposal occurs. In case of a disposal or other reason that does not result in the Company losing control over a foreign operation, the proportionate share of accumulated translation differences are re-attributed to non-controlling interests and are not recognised in profit and loss. For partial disposals of associates or joint ventures, the proportionate share of the accumulated translation differences is reclassified to profit or loss. 9. Financial instruments Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. For financial assets and financial liabilities at fair value through profit or loss, transaction costs are immediately recognised in profit or loss. For other financial assets and financial liabilities, transaction costs are included in their initial recognised amounts. 9.1 Determination of fair value Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. For a financial instrument which has an active market, the Company uses the quoted price in the active market to establish its fair value. For a financial instrument which has no active market, the Company establishes fair value by using a valuation technique. Valuation techniques include using recent arm's length market transactions between knowledgeable, willing parties, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. - 19 -